Year-End Update from Forstrong’s Chief Investment Officer
Much like the disparity between heavy snowfalls in Western provinces and unseasonably warm weather in the rest of Canada, “global imbalances” remain a key theme in world economies and capital markets.
Looking back on 2015, what a year it has been! Many of the same global trends continued. Notably, the ongoing commodity bear market plumbed new 21st century lows, impacting the energy sector and resource-exporting countries like Canada. Also, despite mid-year wobbles, the inexorable rise of China into a financial superpower continued (with the IMF confirming that the Renminbi is now an official major world currency).
However, new crosswinds also surfaced. In the central banking world, the ECB expanded it quantitative easing program to an unprecedented level – now planning to purchase three times the net total of bonds issued by Eurozone governments during the QE period. Meanwhile, the Fed – for the first time in over a decade – finally raised its policy rate (read our latest Super Trends and Tactical Views for our non-consensus take on the investment implications).
Looking ahead to 2016, we continue to see more of the same: heightened government intervention, persistent slow growth in Western economies, and continued wealth convergence of the emerging world with the developed world. To be sure, this is incredibly fertile ground for global, tactical strategies and we continue to recommend the following approach for our clients:
– Remain Widely Globally Diversified. Given the tug of war between heightened central bank activity (bullish for financial assets) and the more sobering realities of slow growth (bearish), it is imprudent to go “all in” on one scenario. The best strategy for clients is to retain a balanced portfolio stance with wide global diversification.
– Structure Portfolios to “Avoid the Big Mistakes”. This has been another year where our performance style of “winning by losing less” has delivered. Often that means simply avoiding the underperformers (energy, commodity-producing countries, etc.).
– Include “Special Opportunity” Investments. ETFs have been a veritable game changer for the portfolio construction process, opening up a wide number of new investment classes. Many of these are outside the subset of mainstream stocks and bonds. We strongly believe building portfolios with this additional global diversification will be essential for successful financial outcomes.
Lastly, a big thank you to all of you – our financial professional partners. Clearly, a client’s success is always determined by the people involved. We are proud to partner with you and anticipate continuing success in 2016.
A forward-looking partnership … strong together … whether four strong winds … through all four seasons … Forstrong.
President and CIO
Categorised in: Blog
This post was written by mstockburn